5/26 Flashcards
The purpose of sending standard confirmation requests to financial institutions with which the client has done business during the year is
Corroborate information regarding deposit and loan balances.
Before applying substantive tests to the details of asset accounts at an interim date, an auditor should
Assess the difficulty in controlling the incremental audit risk.
What is true about the auditor’s observation of physical inventory counts
It can provide evidence supporting the existence assertion
It can provide evidence supporting the completeness assertion
What evidence would an auditor likely examine to determine whether internal controls are operating as designed
Client records documenting the use of EDP programs
What component of an entity’s internal control includes the development of personnel manuals documenting employee promotion and training policies?
Control environment. Relates to the tone of the organization, HR policies and practices
Before reissuing the prior year’s auditor report on the FS of a former client, the predecessor auditor should obtain letters of representation from the
Successor auditor and the former client’s management.
An entity with a large number of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using
A bank lockbox system.
In evaluating the adequacy of the allowance for doubtful accounts, an auditor most likely reviews the entity’s aging of receivables to support management’s FS assertion of
Valuation and allocation. Are net receivables properly valued.
Previous audit expressed qualified opinion due to a scope limitation. You decide to include a separate paragraph in the year 2 review report because comparative FS are being presented. This separate paragraph should include
Substantive reasons for the prior year’s qualified opinion
According to the SEC, other audit partners should rotate off the engagement after
7 years
According to the SEC, lead partners and concurring partners are subject to a ____ time out period
5 year
Under SEC rules covered persons include those in the chain of command who provide ____ or more hours of non-audit services
10 hours
The PCAOB will conduct annual inspections of registered public accounting firms that regularly provide audit reports for more than
100 issuers
When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually
Performs tests of controls and limited tests of current year property and equipment transactions.
A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor’s
Work papers
no review of EL
PY CPA had doubt about going concern. It is removed this year. What is the responsibility if presenting comparative FS
Separate going concern section included in the PY report. Do not repeat in CY
Reporting standards for financial audits under Government Auditing Standards differ from reporting standards under generally accepted auditing standards in that Government Auditing Standards require the Auditor to
Describe the scope of the auditor’s tests of compliance with laws and regulations
Section 404 of the Sarbanes Oxley Act of 2002 requires each annual report of an issuer to includes
Management’s assessment of the effectiveness of internal control over financial reporting
After obtaining an understanding of internal control and performing risk assessment procedures, an auditor decided not to perform tests of controls. The auditor most likely concluded
Additional evidence to support a reduction in control risk was not cost beneficial
What professional services would be considered an attest engagement covered by Statements on Standards for Attestation Engagements SSAE
An engagement to report on management’s discussion and analysis
The degree of audit risk always present in an audit engagement is referred to as a combination of nonsampling and sampling risks. What is an example of nonsampling risk
The auditor selecting inappropriate auditing procedures.
using inappropriate audit evidence, failure to recognize misstatements in documentation.
According to ethical standards, a CPA’s independence would most likely be impaired if
Contracted with a client to supervise client office personnel.
Impaired if you make management decisions on behalf of the client.
Auditor decides to perform substantive tests on PPE as of interim date. What additional work must be performed to extend the audit conclusions from interim to BS date
Substantive procedures for the period between the interim and BS date.
For classic variable sampling for estimates, an auditor normally evaluates sampling results by calculating the possible error in either direction. This concept is
Precision.
What is the best type of visualization when performing a trend analysis
Line chart
What is a concept difference between the attestation standards and generally accepted auditing standards?
Attestation standards provide a framework for the attest function beyond historical FS.
What documentation is not required for an audit in accordance with GAAS
The basis for the auditors decision to not perform tests of controls concurrently with obtaining an understanding of internal control.
Auditor is not required to evaluate operating effectiveness
What is true for a CPA may or may not disclose the names of its clients without permission
Firm may disclose unless disclosure would suggest that the client may be experiencing financial difficulties.
When there is substantial doubt paragraph, the section must include the terms
Substantial doubt & Going Concern.
Under Government Auditing Standards, when a clients audit committee takes no action to report fraud
The auditor has the responsibility to communicate fraud to individuals contracting for or requesting the audit
